Equities Summary and Outlook
Market Outlook. We expect the PSEi to hover between 7,400-7,700 amidst weak sentiment over the country’s accelerating inflation, overheating risks, and rising US bond yields ahead of Q1 earnings results. Last Friday, BDO announced its Q1 2018’s core earnings (+16% y-o-y, underperformed), while CHP and MER will disclose their Q1 results on April 27 and April 30, respectively.
Market Review. The PSEi traded sideways yesterday, -0.1% to close at 7,719.2. Last week, it fell 173 points (-2.2% week-on-week, w-o-w) to close on Friday at 7,726.7 after a mid-week meltdown on April 19 saw the PSEi dropped to a 1-year intra-day low of 7,543 (-250 points or -3.3%) propelled by massive net foreign selling totaling P2.7bn.
- All counters were in the red last week, led by Mining and Oil (-4.4%), Services (-4.1%), Holdings (-3.3%).
- W-o-w, PSEi was one of the region’s underperformers, together with China (-2.8%), Taiwan (-1.7%) and Hong Kong (-1.3%). YTD, it was the second worst performing market in the world, -9.7%. From its peak of 9,058 on Jan. 29, PSEi has dropped by 14.7%.
- Net foreign selling picked up last week to P2.9bn from previous week’s P1.8bn. YTD, it totaled P40.3bn attributed to 11 straight weeks of net foreign outflows.
- PHP closed on Friday at P52.08/$, down 0.3% w-o-w and 4.1% YTD.
- Most bought stocks by foreign investors last week were MER, MBT, JFC, PCOR and RRHI totaling P312mn, while most sold stocks were SMPH, AGI, SM, SECB, and AC aggregating to P1.8bn.
- YTD, there was massive foreign sell-off for SM, ALI, BDO, AC and SMPH for a combined amount of P25bn, while investors flocked to TEL, MER, JFC, PGOLD and SMC for a total of P3.4bn.
Moody’s Analytics expects Philippines’ Q1 GDP growth to pick up to 6.8% y-o-y from 6.5% in Q4 2017 and Q1 2017. Growth will be driven by robust domestic and external demand and favorable demographics. Healthy OFW remittances and firm labor market are expected to boost consumption spending while the government’s infrastructure push will raise investment spending. We (house view) expect Q1 2018 GDP to grow at a faster pace of 7% on account of superb annual job growth to Jan. 2018, strong government spending (+25.5% in Jan-Feb), and significant upticks in manufacturing (+21.7% in Jan-Feb).
Bangko Sentral ng Pilipinas (BSP) reported that the country’s balance of payments (BOP) posted a deficit of $266mn in March, lower than the deficit of $429mn in Feb. and $550mn in the same period last year. The outflows stemmed mainly from the foreign exchange operations of BSP and payment of maturing foreign exchange obligations by the government, which was partially offset by net foreign currency deposits of the NG and income from BSP’s investments abroad. YTD-March, BOP deficit totaled $1.2bn, exceeding BSP’s full year estimate of $1bn deficit.
BDO Unibank, Inc. (BDO) posted core income of P6.7bn (+16% y-o-y) in Q1 2018, behind the company’s guidance of P31bn for 2018. This excluded the impact of MTM revaluation of the investment portfolio of BDO life (due to impact of PFRS 9) and on-going restructuring and expansion cost of One Network Bank. BDO’s loan growth in Q1 sustained its robust growth at 18% y-o-y. Net interest income grew 20% y-o-y, while fee-based income increased by 2% y-o-y. BDO share prices closed yesterday at P130.90/share, -20.2% YTD.
Aboitiz Equity Ventures (AEV) disclosed that it will more than double its capex (+120% y-o-y) for 2018 to P77.6bn from P35.3bn in 2017. Bulk of capex will be spent to finance power projects (P61.6bn) in order to increase its net sellable capacity from 3,000 MW to 4,000 MW by 2020. The rest of the capex will be allotted for its other businesses — food (P4.6bn), land (P4.5bn), infrastructure (P4.4bn) and banks and financial services (P2.4bn). AEV’s share prices ended yesterday at P69.80/share, -5.7% YTD.
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